GM works smarter in Europe's small-car market

ZARAGOSA, Spain - Outside of North America, one of General Motors' biggest competitive challenges is in a market most Americans are oblivious to and where GM's fortunes rest on a small car that most Americans have never seen - the Opel Corsa.

While big trucks and sport-utilities are making automakers rich in the United States, GM is battling for market share in Europe and Asia with a car that is smaller than a two-door Chevrolet Metro.

Even more challenging for GM, that market is stagnating, and GM is not kidding itself about selling more Corsas.

GM's solution: Improve the product, and squeeze more profitability out of the factory.

'We will be faced with intense competition next year,' acknowledges Rainer Michel, Corsa assistant brand manager at Adam Opel AG, the European GM subsidiary in charge of producing the car. 'This is not a growing market. The issue here in Europe is the competition. The quality level here is all very good, and we have had to catch up.'

1 MILLION SALES

Opel introduced the latest generation of the Corsa in September. The 140-inch-long Corsa, now built in 11 factories on five continents, could see production of more than 1 million cars next year. If so, it would return the car to 1997 volumes.

That may not be the kind of bullish outlook GM exudes in North America or in emerging markets. But for the huge automotive market outside of North America, the Corsa symbolizes another reality for GM: Sometimes you have to keep investing just to keep your place in a crowded market.

That is what GM has been doing for the past year here at the main Corsa plant in eastern Spain.

Just as the Civic is to Honda Motor Co., or the Golf is to Volkswagen AG, the Corsa has become GM's core world car.

ONE BIG FACTORY

Opel has spent $400 million upgrading the Corsa plant in Zaragosa. That investment will not gain GM a single additional unit for sale - even if it were possible to sell more.

The factory already is the biggest volume auto plant under one roof in GM's manufacturing arsenal. Last year the plant ran three shifts a day to build more than 410,000 Corsas - just 40,000 fewer than its maximum production. Plant managers are under pressure to address line repairs and maintenance while cars are moving through the line because the lines do not stop between shifts, explains Jose Lopez, manager of Zaragosa's paint plant.

To keep up with Zaragosa's volume, the car's critical suppliers also run three shifts a day. Moving to a higher level of Corsa output would require a massive investment throughout the supply chain.

The recent capital improvements in Spain instead were directed at building the Corsa better and cheaper. The effort saw Zaragosa's managers install robots at several spots to reduce quality variations. It saw an influx of Japanese-inspired lean-manufacturing techniques at the plant, with help from managers such as Lopez, who previously worked at New United Motor Manufacturing Inc., GM's 50-50 U.S. joint venture with Toyota Motor Corp. By the end of last year, the Spanish plant chiseled $250 out of the manufacturing cost of each car.

That in itself returns more than $100 million a year to the Corsa's profit equation.

ROBOTS TRIPLED

The plant has more than tripled its number of robots with the new Corsa model, from 300 to more than 1,000. Robots feed steel blanks into stamping presses. They handle the car's framing with cameras monitoring the alignment. They install fuel systems and hoses. They install seats, which pass from the supplier's factory into the Corsa without being touched by humans.

At other places on the line, engineers discovered the line simply moved too fast to be automated. That prompted Opel to divide the work into two production lines. By splitting the work, the plant could allow up to 80 seconds between cars, instead of the 40 seconds that prohibited a slow-moving robot from doing its job.

The final goal was not to build more Corsas but to improve quality. Consumer complaints about rattles from the previous Corsa's rear bumper caused designers to stop bolting the bumper on - a job that might vary from car to car in the factory. Now the bumper is snapped into place using clips that require no bolt tightening.

'Opel's reputation has suffered in recent years,' Michel says. 'We want to be as successful as before. The quality level at startup had to be very good.'

WHAT CUSTOMERS WANT

Opel also is changing content on the Corsa. Since 1997, the Corsa has lost more than 2 points of market share in Germany. Across Western Europe, it has dropped 2.6 points in the past three years.

Part of its sales decline in recent years has gone to competitors with diesel engines, especially in diesel-heavy markets such as Italy and Germany. Opel admits that diesel capacity has held back sales in Europe. The new Corsa is expected to run at about 20 percent diesel initially but increase to as much as one-third of all sales as more diesel engine production comes on line.

Air conditioning also is on the rise. Last year, about 30 percent of Corsas had air conditioning. The new generation is forecast for 50 percent.

The car's new design was shaped by a desire to appear less feminine. Opel feared that the image might be holding the car back in southern European markets, where men typically make purchase decisions. Designers pushed out the wheels and deleted some of the car's surface contours.

As another sign of the tough competition in the segment, Opel has added more high-tech content to the car. The new Corsa contains standard electric power steering for the first time. It also is introducing an Easytronic transmission on the car - which could help separate the car from the crowded class. By using the automatically shifted manual technology instead of a bona fide automatic transmission, Corsa will give buyers the flavor of an automatic for half the cost without surrendering fuel economy.

But where additional production would come from is not clear. Zaragosa can build as many as 450,000 units at maximum capacity. But the plant also is responsible for serving export markets with the Corsa. A second Corsa plant, in Eisenach, Germany, also is producing to its capacity of about 80,000 cars a year. A third plant, in Azambuja, Portugal, can produce only about 10,000 a year.